What's on TV tonight? The sky's the limit with SMG's IPTV service

Shanghai is testing ground for new services going nationwide

SHANGHAI--Television viewing has become a lot more engaging for viewers as well as marketers in Shanghai, now home to one of the world’s most advanced IPTV systems.

With increasingly disruptive ad-skipping technologies like personal video recorders on the horizon, advertisers such as Nike, Johnson & Johnson, Coca-Cola Co. and Procter & Gamble are experimenting with the platform, which is being rolled out in other parts of China as well.

When Shanghai Media Group (SMG) moved into IPTV--internet protocol television, or multimedia services such as TV, video, audio, text, graphics and data delivered over IP-based networks--last year, it made local headlines. And not just with viewers. Marketers are looking at IPTV as a welcome alternative to free-to-air TV stations.

Their interest is partly a money-saving move. Local and provincial broadcasters, and especially the nation’s largest player, China Central Television (CCTV), have steadily hiked rates during the marketing frenzy taking place in the mainland in the months leading up to the 2008 Olympic Games.

Those channels blanket their territories at great cost to the advertiser, but companies like Nike, one of the first to test IPTV in China as a marketing tool, aren’t looking for mass-market exposure. Two-thirds of China’s population remain too poor to dream of buying a pair of the sportswear company’s shoes. Foreign marketers, especially upscale ones like Nike, target young, urban, trendy adults with disposable income--the same people who can afford to buy IPTV packages costing 22 to 100 RMB ($3.20-14.50) per month.

“IPTV users are early adopters who tend to be younger and more affluent than the market average,” said Shanghai-based Andrew Carter, national tactical planning director for China at MindShare.

China Telecom partnership

Flexibility is part of IPTV's attraction. The technology enables services like gaming, video-on-demand and playback, letting viewers navigate the system much as they would operate a DVD player, with remote, fast forward and pause options.

China’s State Administration of Radio, Film, and Television (SARFT) has granted four national licenses to SMG in Shanghai, the internet division of CCTV in Beijing, and Guangdong-based Southern Media Corp.--essentially covering China's three first-tier cities, Beijing, Shanghai and Guangzhou. The final license was issued to China Radio International.

So far only SMG is operating an IPTV service, through an alliance with China Telecom subsidiary Shanghai Telecom, a partnership that gives SMG a head start in the IPTV arena. Over 90% of Shanghai households already are customers of China Telecom, providing an easy billing mechanism.

China Telecom also has a comprehensive retail network in the city, and has attracted customers to the IPTV network by bundling it with other services the telecom giant offers, such as broadband connections. SMG, one of China’s most innovative broadcasters, contributes its vast programming library and expertise.

“It’s a good model, bringing those two together,” said Allen Law, CEO of CTS. His company is independent but is the exclusive advertising partner for the IPTV service operated by SMG, the country's second-largest broadcaster after CCTV, and the clear leader in China’s IPTV industry.

SMG has signed up 600,000 customers in Shanghai, home to about 3.5 million TV households. SMG is also rolling out its IPTV service to other provinces such as Zhejiang, Fujian, Hubei and Shanxi.

Niche channels

SMG's platform is divided into sections, including a lifestyle zone with 104 channels, including all of the ones offered by CCTV and China's provincial broadcasters, most of which are also available on competing cable systems. But it has dozens more devoted to niche interests like tennis, yoga, video games, golf and finance. Each programming block starts with a 30" spot for brands like Nivea and Neutrogena.

There is also a video-on-demand zone with more than 5,000 hours of movies, drama series, and programming about sports, finance, music and other interests owned by Shanghai Media Group. The third section lets viewers play back programming that aired over the past 48 hours, a service that lets sports fans catch games they missed during the live airing, for example.

"The playback function will have big value during the Olympics, when so many events are happening at the same time," said Mr. Law, a Hong Kong native and the former general manager of StarcomMediaVest in Shanghai.

For marketers, the attraction of IPTV is getting away from 30" spots and offering more interactive and engaging content. Nike’s campaign, one of the first by a major marketer on the platform, was built around the American basketball star LeBron James.

“The objective was to help Chinese youth further understand how and why he is such an amazing player,” said Mr. Carter. “Although IPTV is still in early development, and penetration is low versus traditional formats, technology available gave Nike the opportunity to test various methods of communication which would complement the traditional format.”

The campaign, created jointly by Nike, MindShare, Wieden + Kennedy and SMG, also coincided with the launch of the player's latest shoe, the LBJV, and the visit of his team, the Cleveland Cavaliers, last spring.

A branded LBJ zone of the IPTV platform, accessible through a large permanent banner on the IPTV home page, showcased the athlete's career. The zone let viewers view major basketball games, 16 short films chronicling the basketball star’s life and a 60” TV spot featuring the new product line. They could also take quizzes to win Nike merchandise. The site logged over one million visits in four weeks.

“One of the key selling points of IPTV is its accountability. Nike was able to accurately track all the components and analyze which creative formats worked, which environments were most effective and which content delivered the highest engagement,” said Mr. Carter. “The results delivered are a clear indication that if the content is engaging, then the viewer is willing to be diverted away from the traditional viewing stream.“

Based partly on the success of Nike’s one-month test run, P&G has inked a one-year deal with Click To See to sponsor about two dozen lifestyle and fashion channels in a branded section of the platform called i-channel.

Each channel is associated with a specific P&G brand, such as Olay, Whispers, Vidal Sassoon, Head and Shoulders, Pantene, Gillette, and Herbal Essences, and programmed accordingly with content that fits the target market. (See also, “China is P&G learning lab,” AdAgeChina, June 4, 2008.)

The Olay channel, for instance, offers Japanese and Korean drama series that are popular with Chinese women, while the Gillette channel focuses on sports and finance news. P&G isn't running commercials for P&G brands on i-channel, however, to main a "soft sell" approach, said Lee Li, CTS' general manager in Shanghai.

Companies like P&G and Nike are still figuring out how to maximize IPTV though, said Mr. Carter. “As with all new media, you will never get it completely right the first time. We are still at the early stage of digital and like all new technology, it takes experimentation.”